10 September 1999

Milk Marque members face reduced pay-outs

By Robert Harris

MILK Marque members face lower ex-farm prices from October onwards, following completion of the co-ops latest selling round this week. Other dairy companies are also cutting prices.

Although MM still claims to be crunching numbers and will not reveal any figures, trade estimates suggest a 0.7p/litre fall is likely. This would take the total reduction for the milk year to 1.55p/litre.

All the milk, about 13m litres, was sold, says a MM spokesman. "We had a good range of bids across contracts. But market conditions remain dreadful – indications are that prices will drop."

Independent consultant Mike Bessey suspects about 60% of milk was sold in the "residual" band, thought to be priced near the Intervention Milk Price Equivalent, about 18p/litre, and the slightly higher "fluctuating" band, worth slightly more.

The balance would have made 1-2p/litre more in "ex-farm" and "premier" contracts. "Overall, if this is the case, prices could be down 0.6-0.7p/litre."

Roger Metcalf of Agrifood Consultants agrees, suggesting MM could realise about 18.5p/litre, compared with 19.2p/litre thought to have been achieved last time round.

"But this means it will only be able to pay about 16.5p/litre to producers after costs, which, including transport and administration, amount to at least 2p/litre."

Stephen Bates of Wye College says prices could range from 16-17p/litre. "For those at the lower end, things will be extremely tight."

Other dairy companies will follow the MM price down from October, he adds.

Nestlés John Bavistock declined to comment on rumours of a 0.75p/litre cut for Scottish milk supplies, though he confirmed that prices would fall – both north and south of the border. Express Dairies is waiting for the outcome of the MM selling round before making a decision.

Last week MD Foods announced a massive provisional 2.25p/litre price cut on its standard litre in East Anglia. But, this is said to be a "worst-case scenario" value, since it has to give producers three months notice of any price change, a requirement inherited when MD took over the Lord Rayleigh business.

Actual levels will depend on the strength of sterling and what other companies do, says a spokesman. But it is talking with other supply groups around the country to set new prices from Oct 1.

Golden Vale has announced a cut in its standard litre (4.1% butterfat, 3.25% protein, top Bactoscan and cell count band) to 17.2p/litre from Oct 1, a fall of about 1.9p/litre. &#42